Michael Saylor's desire to make changes to Bitcoin accounting has arrived

Michael Saylor’s desire to make changes to Bitcoin accounting has arrived

Bitcoin-loving billionaire Michael Saylor has spent months lobbying for rule changes related to cryptocurrency and its accounting procedures. On Wednesday, he finally got his wish.

The Financial Accounting Services Board (FASB) has approved the adoption of fair value accounting procedures for digital assets. This would in theory make assets like Bitcoin more attractive for companies to hold on their balance sheets.

New Accounting Model

as such mentioned Reported by the Wall Street Journal, the Financial Accounting Standards Board said during its recent meeting that fair value accounting “better embodies the economics of crypto assets.” In fact, they are determined to make the standard a requirement rather than an option.

“We’ve heard from investors that they want transparency through disclosure, and the only way to get there is with fair value,” said board member Gary Besser.

Fair value accounting simply involves calculating a company’s assets based on their current market price. In other words, accountants can respond instantly to the often volatile movements in the cryptocurrency market.

Prior to this change, Bitcoin was treated as a “long-life intangible asset,” whose price was reviewed only once a year when reported in financial statements and earnings reports.

Under this system, companies cannot increase the value of bitcoin on their balance sheets if the price rises above the initial purchase price – unless it has been sold in fiat currency beforehand. By contrast, they were still required to write down the value of their holdings if Bitcoin fell below the initial purchase price.

In other words, the value of bitcoin can only fall on an individual’s balance sheet until it is sold. This base has contributed to many high profile Bitcoin whale detections – including Tesla And the MicroStrategy Hundreds of millions in impairment charges during the worst quarters of a bear market.

As such, MicroStrategy has called for a change in Bitcoin’s accounting rules to something more appropriate for the crypto market. Former CEO Michael Saylor Show excitement in May when the board confirmed it would begin looking at fair value accounting for the asset class.

“I can understand that accounting under the intangible model does not necessarily yield meaningful results,” said Marsha Hunt, a member of the FASB Board of Directors at the time.

Nima for institutional adoption

MicroStrategy’s new CEO and former chief financial officer, Phong Le, told WSJ that the current approach has forced companies to inaccurately prepare their financial statements regarding bitcoin.

“We expect the disconnect between the book value reported on our balance sheet and the fair market value of our bitcoin holdings to grow exponentially over time,” he told FASB in a letter last year.

Denise Appelbaum, assistant professor of accounting and finance at Montclair State University, said the fair value system could make companies less reluctant to add Bitcoin to their balance sheets. “Without these standards for accounting and valuation of crypto assets, companies will be reluctant to hold them,” she said.

Bad accounting rules were one of the ten obstacles included By Saylor in June that supposedly prevents Bitcoin from reaching mainstream adoption. Others include the “fear and ignorance” surrounding the currency and its effect on environmentthe absence of a Bitcoin spot ETF in the United States of America.

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